SOEsÔÇô WhatÔÇÖs next?

by Herbert JauchColumns

Our State-owned Enterprises (SoEs) have made headlines over the past few months, again – mostly for all the wrong reasons.
Namibia Wildlife Resorts (NWR) reportedly paid its former managing director five-years’ wages when he resigned. The Namibia Airports Company (NAC) recently retrenched all its staff and then rehired them, some at lower salaries and benefits while at the same time paying a consultant over N$5m for a three-months’ work. At TransNamib, the board and management have been at loggerheads for years while Air Namibia has presented one turn-around strategy after the next as its losses increase.
The performances of several SoEs in Namibia suggest that they are in crisis, spend too much on inflated management packages and perform poorly. This has led to calls for privatisation and downsizing. However, while this might relieve the national budget, it won’t necessarily improve service delivery, especially to the poor. International experiences have shown that while one of the key objectives of privatisation is to improve service delivery, privatisation often worsens the plight of the poor. Given the high levels of unemployment, poverty and inequality in Namibia, any attempts to restructure the SoEs would have to ensure that basic services remain accessible to the poor. This aim cannot be sacrificed for commercial considerations.
The question of an SoE reform in Namibia is not new and various strategies have been put forward since independence. The most prominent intervention has been the “commercialisation” policy that has had mixed results. What seems clear is that several of the key challenges of SoEs that have been identified over the years (such as a lack of efficiency and profitability) have not been successfully addressed. SoE reforms today, thus, need to be tailored to address the specific problems while taking cognisance of the different roles and functions performed by different groups of SoEs.
Those performing regulatory functions (such as the Bank of Namibia or the Meat Board) need to place emphasis on capacity and efficiency in their operations. Those SoEs entrusted with delivering important services (such as NamWater or the National Housing Enterprise) will have to be measured differently. They perform important developmental functions and should not be judged by commercial criteria alone. Instead, “social efficiency” seems to be the more appropriate yardstick, that is the delivery of good quality services as cheaply as possible to make them affordable for all.
In such cases, a subsidisation by Government is not only justified but necessary. However, this must not mean that the current problems should be allowed to continue – quite the contrary. The performance and efficiency of service-delivery SoEs must be enhanced while retaining them under public ownership. Privatising them would be tantamount to “throwing the baby out with the bath water” as private businesses operate on a profit motive, which would exclude the poor from receiving the services.
A democratically elected government certainly has a developmental role to play and the provision of affordable services of good quality should be part of that mandate. Namibia has to carefully assess which type of SoE reform would increase efficiency while at the same time safeguarding employment and affordable service delivery for the disadvantaged majority. Some of the SoE reforms could include the following:
A gradual but systematic reduction of management packages and the introduction of a transparent performance-based remuneration system. The current practice of rewarding incompetent managers with huge remuneration packages and multi-million-dollar severance pay is not only unjust but creates the impression that non-performance is actually rewarded.
SoE managers and board members alike need to be chosen carefully, based on skills, performance and competence. They also need to be held accountable for their actions as Government cannot be expected to just bail them out when they drive SoEs into ruins and still reward themselves handsomely in the process.
In addition, SoE board members seem to be in need of training to effectively perform their oversight functions and to direct management without interfering in the day-to-day operations.
SoEs need to be strictly monitored to avoid conflicts of interests and corruption. The recent case of NAC has shown how mismanagement results in workers losing benefits in wages while consultants are given more than N$5m for a three-months’ work. This seems to have taken place without formal board approval and thus raised questions about vested interests involved.
On overall, some of Namibia’s SoEs seem to perform well while others have failed to live up to expectations. The type of intervention required may differ from one SoE to another but there is no doubt that many of them play an important developmental role in terms of service provision or regulation. Privatising them as suggested by some SoE critics is unlikely to provide the solution because the private sector would be interested in the SoEs with good prospects for profitability while the eternally loss-making ones would certainly remain with Government.
It might thus be more beneficial to clearly identify the developmental potential and role of SoEs and to ensure that they achieve social efficiency and use their resources optimally. This would certainly require political will and technical competency – otherwise, the current state of affairs is likely to continue.